Citadel Holding backed away Friday from its hostile bid to acquire Valley Federal Savings & Loan, announcing that it will not try to extend its options to buy 39.2% of Valley Federal’s stock.
The options, which were granted by several major Valley Federal stockholders, expire Sunday. Citadel, the Glendale-based parent of Fidelity Federal Savings & Loan, would have been unable to buy the stock before then in any case, because the company has yet to receive federal regulatory approval to purchase the shares.
But Citadel said it had also decided not to extend the options because, after reviewing Valley Federal’s financial records, it concluded that the Van Nuys-based thrift was not worth the $18.50-a-share that Citadel had agreed to pay.
Citadel, which had also agreed to pay a $2-a-share premium for the options last November, tried to use them as a springboard for acquiring all of Valley Federal. In January, Citadel made its unsolicited $18.50 bid--a total of $107.3 million--but was rebuffed by Valley Federal, which has $3.3 billion in assets.
In a telephone interview Friday, Citadel Chairman James A. Taylor said: “If we had full approval, we wouldn’t do it at this price.” He would not say what he considers an appropriate price.
David Fleming, Valley Federal’s outside counsel, declined to comment on Citadel’s announcement.
Later in the day, Valley Federal’s stock closed at $15 a share, down $1.25, in national over-the-counter trading.
Citadel, with $3.9 billion in assets, said it would keep trying to get approval from the Federal Home Loan Bank Board, the agency that regulates the nation’s S&Ls;, to buy 39% of Valley Federal. But Citadel’s application has run into snags.
Last month, the FHLBB said the first application was deficient because Citadel did not include information about its largest stockholder, Hecco Ventures, and several other firms and individuals associated with Hecco and its officials.
Hecco, an investment partnership in Los Angeles, owns 9.6% of Citadel and is also a dissident holder of 9.9% of Valley Federal. It is pressing for Valley Federal to be sold.
At Valley Federal’s annual meeting April 27, Hecco succeeded in having one of its general partners, James J. Cotter, elected to Valley Federal’s 10-member board. Valley Federal has filed suit to block Cotter’s election but said Thursday that it would seat him conditionally pending the suit’s outcome.
Cotter’s presence on the board is just one reason why Valley Federal, despite holding Citadel temporarily at bay, remains under pressure to improve its performance or find another way, such as a merger, to lift its stock price.
At their annual meeting, Valley Federal’s stockholders elected another dissident nominee, money manager Andrew Pilara Jr., to the board. They also overwhelmingly approved a proposal by Hecco to establish a special committee of Valley Federal directors that would seek and consider proposals to buy the S&L.;
Profit Way Down
Valley Federal’s management ruled that the proposal was out of order, saying that it abrogated the board’s powers and violated federal rules. But Thursday, Valley Federal said it had established its own special committee to find ways “relating to the maximization of shareholder values.”
In this year’s first quarter, Valley Federal’s profit tumbled 68% from a year earlier, to $1.39 million from $4.35 million. That followed a 49% earnings drop in last year’s fourth quarter and a 3% profit decline for all of 1987.